iRobot 2nd Quarter 2008 Conference Call Notes

UPDATE: Seeking Alpha has posted a complete transcript.

iRobot's Conference Call featured many key tidbits for the future, and still some unanswered questions.
* International sales were blockbuster, but hurt margins (blamed for a 4.5 percentage point fall!). (Ed: Odd that international sales hurt margins given the weak dollar; this was not explained). Company is reasonably confident that international sales are not just channel fill but are flowing through to sales.
* Reduced direct sales mix hurt margins. (Higher direct sales last year were due to the rollout of the Scooba 380 infomercial, since discontinued).
* Higher labor and freight costs from China are hurting margins.
* Margins will improve substantially in the second half, as per iRobot's norm. (Ed: Loss of 34 cents in first half will have to be offset by profit of at least 55 cents a share in second half to meet their guidance). They sounded cautious over the economy, but CEO Colin Angle said "We aren't seeing it" given that sales are growing strongly.
* Roomba sell-through in the U.S. was up 40% despite the economy.
* Roomba 500's lower warranty costs are helping margins, and will help more and more going forward.
* PackBot Backlog is up to $39 million counting yesterday's order. At least one more major order is expected in the third quarter.
* Shift to cheaper PackBots hurt margins.
* No change to Linens 'N Things Q1 charge. Not banking on getting money back via the courts (maybe pennies on the dollar?). Tight payment terms, etc. with future shipments. (UPDATE: LNT may be on its last legs, NY Post reports.)
* A small additional hit was booked on the iRobot's portfolio of Auction Rate Securities ($600,000? Didn't quite hear.) But $1.2 million was redeemed at par.
* Volume FCS SUGV shipments now expected in Q4 2009.
* SUGV Early is available and ready to be shipped earlier. Not clear if there would be cannibalization with xBot/PackBot with FasTac contract. Could be sold to different customers.
* Working on something with iRobot Warrior, but Colin Angle didn't want to announce it yet.
* Cheaper nickel prices won't help this year because they've already hedged the full year's supply. (Ed: It could help next year if they buy more now).
* The company is considering consumer expansions into central and eastern Europe, but not before 2009.

Tags: iRobot, robot